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Table 12-3
Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes
Arnie's output per day (Q), total cost (TC), average total cost (ATC) and marginal cost
(MC).
Refer to Table 12-3. What will Arnie's output be and how much profit will he earn if the
market price of basketballs is $5.00?
A) Q = 1; profit = -$10.
B) Q = 3; profit = -$7.50
C) Q = 0; profit = -$10.00
D) Price and profit cannot be determined from the information given.
As the value of the Gini coefficient approaches one
A) income distribution becomes less unequal.
B) income distribution becomes more unequal.
C) the percentage of the population under the poverty line increases.
D) the percentage of the population under the poverty line decreases.
Which of the following is not an advantage cost-plus pricing?
A) It leads to profit maximization.
B) It is an easy method to implement if a firm produces multiple products and has
overhead costs that are difficult to allocate to a particular good.
C) It could lead to price stability if the industry is made up of identical firms all using
the same method of pricing.
D) It is easy to justify price increases when total costs of production increase.
Suppose you pre-ordered a non-refundable movie ticket to X-Men: Apocalypse. On the
day of the movie you decide that you would rather not go to the movie. According to
economists, what is the rational thing to do?
A) Since the cost of the movie ticket is a sunk cost, it should not influence your
decision. Your decision should be based solely on whether you want to see the movie or
not.
B) You should not waste resources. Since you have paid for the ticket you should watch
the movie.
C) Your should go to the movie to minimize your losses.
D) You should go to the movie to maximize your utility.
Stockholders
A) are liable for the debts of a corporation.
B) are the owners of a corporation.
C) control a corporation's day-to-day activities.
D) hire the managers of a corporation.
As a form of business, a partnership
A) has limited liability.
B) has only one owner.
C) cannot issue stock.
D) has the most government rules and regulations affecting it.
If productive efficiency characterizes a market
A) the marginal cost of production is minimized.
B) firms produce the goods that consumers desire most.
C) the output is being produced at the lowest possible cost.
D) firms use the best technology available to produce the good.
Monopolistic competition is a market structure in which
A) firms produce and sell products for which there are no close substitutes.
B) the demand curve for a typical firm is horizontal.
C) firms cannot influence the market price.
D) barriers to entry are low.
Table 10-2
Table 10-2 above shows Keira's utility from soup and sandwiches. The price of soup is
$2 per cup and the price of a sandwich is $3. Keira has $18 to spend on these two
goods.
Refer to Table 10-2. Holding prices constant, when Keira's income changed from $18
to $23, her utility maximizing bundle changed. Based on your answers to her optimal
choices at the two income levels, what type of goods are soup and sandwiches?
A) Soup is an inferior good and sandwiches are a normal good.
B) Soup is a normal good and sandwiches are an inferior good.
C) Both soup and sandwiches are normal goods.
D) Both soup and sandwiches are inferior goods.
Which of the following is a factor of production?
A) an oven in a bakery
B) a share of General Motors' stock
C) a credit card
D) a $500 Treasury bond
Which of the following would cause both the equilibrium price and equilibrium
quantity of potatoes (assume that potatoes are an inferior good) to decrease?
A) an increase in consumer income
B) a freeze that sharply reduces potato output
C) a decrease in consumer income
D) a technological advancement that results in a bumper crop of potatoes
For a firm that is a price taker in the market for labor, the marginal revenue product of
labor equals the
A) marginal product of labor multiplied by the wage rate.
B) marginal product of labor multiplied by the product price.
C) marginal product of labor divided by the wage rate.
D) marginal product of labor multiplied by the marginal cost of production.
If the opportunity cost of production for two goods is different between two countries,
then
A) trade cannot benefit either country.
B) only one country can be made better off by trade.
C) mutually beneficial trade is possible.
D) trade will only benefit both countries if one can lower its opportunity costs.
If the price of orchids falls, the substitution effect due to the price change will cause
A) an increase in the demand for orchids.
B) an increase in the demand for roses, a substitute for orchids.
C) an increase in the quantity of orchids demanded.
D) an increase in the quantity of orchids supplied.
Figure 14-2
The government of a developing country plans to award two firms, Gigacom and
Xenophone, the exclusive rights to share the market for high speed internet service.
Gigacom and Xenophone can both provide the service either via television cable lines
or via direct subscriber line (DSL). Suppose the government is considering a proposal
to delay one firm's entry into the market on the grounds that it wants to prevent
"harmful" competition. Figure 14-2 shows the decision tree for this game.
Refer to Figure 14-2. Now suppose that the government delays Xenophone's entry and
Gigacom moves first, what is the likely outcome in the market?
A) Both offer internet service via cable line; Xenophone earns a profit of $6 million and
Gigacom earns a profit of $9 million.
B) Both offer DSL internet service; Xenophone earns a profit of $8 million and
Gigacom earns a profit of $7 million.
C) Xenophone offers DSL internet service and earns a profit of $5 million while
Gigacom offer internet service via cable line and earns a profit of $6.5 million.
D) Xenophone offers internet service via cable line and earns a profit of $4 million
while Gigacom offers DSL internet service and earns a profit of $4.5 million.
A monopolist's profit-maximizing price and output correspond to the point on a graph
A) where average total cost is minimized.
B) where total costs are the smallest relative to price.
C) where marginal revenue equals marginal cost and charging the price on the market
demand curve for that output.
D) where price is as high as possible.
Table 1-2
Thuy Anh runs a small flower shop in the town of Florabunda. She is debating whether
she should extend her hours of operation. Thuy Anh figures that her sales revenue will
depend on the number of extra hours the flower shop is open as shown in the table
above. She would have to hire a worker for those extra hours at a wage rate of $16 per
hour.
Refer to Table 1-2. What is Thuy Anh's marginal cost if she decides to stay open for an
extra three hours instead of two hours?
A) $0
B) $16
C) $25
D) $32
E) $45
Most economists agree that some of the burden of the corporate income tax
A) is reduced because the tax is progressive.
B) is shared by the federal government.
C) is reduced because the tax is used to attain a social objective.
D) is passed on to consumers in the form of higher prices.
Average variable cost can be calculated using any of the formulas below except
A) TVC/Q.
B) (TC - FC)/Q.
C) Δ(TC - FC)/ΔQ.
D) (TC/Q) - AFC.
Jonah lives in a small town where there is only one Mexican restaurant. Which of the
following is likely to be true about the price elasticity of demand for meals at the
Mexican restaurant?
A) Demand is likely to be perfectly inelastic.
B) Demand is likely to be perfectly elastic.
C) Demand is likely to be relatively elastic.
D) Demand is likely to be relatively inelastic.
Figure 11-3
Fancy Footwear manufactures shoes. Figure 11-3 shows Fancy Footwear's marginal
product of labor and average product of labor curves in the short run.
Refer to Figure 11-3. Which of the following statements correctly describes the curves
in the figure?
A) The marginal product of labor curve is represented by curve A and the average
product of labor curve is represented by curve B.
B) The marginal product of labor curve is represented by curve B and the average
product of labor curve is represented by curve A.
C) Curve A could represent either the average product curve or the marginal product
curve. Curve B represents the total product curve.
D) Curve B could represent either the average product curve or the marginal product
curve. Curve A represents the total product curve.
What must balance on a balance sheet?
A) Total assets must equal total liabilities plus equity.
B) Revenues must equal costs.
C) Retained earnings plus dividends paid must equal earnings per share.
D) All of these must balance.
The Arrow impossibility theorem
A) explains why people can be rational as well as ignorant at the same time.
B) explains why voting systems do not consistently represent the preferences of voters.
C) explains why candidates for public office must represent the preferences of the
political middle.
D) explains why it is impossible, in most cases, to eliminate special-interest legislation
after it has become law.
Which of the following statements about perfect price discrimination is false?
A) There is no consumer surplus if a firm engages in perfect price discrimination.
B) Perfect price discrimination occurs when the seller charges the highest price each
consumer would be willing to pay for the product.
C) A condition for perfect price discrimination is that it must be costlier to service some
customers than others.
D) For the price-discriminating firm, its marginal revenue curve coincides with its
demand curve.
When there is a positive externality
A) the private benefit received by consumers is greater than the external benefit.
B) the social benefit received by consumers is greater than the private benefit.
C) the private benefit received by consumers is greater than the private cost.
D) the private benefit received by consumers is greater than the social benefit.
Dividing the dividend payment by the stock's closing market price determines the
A) coupon payment.
B) dividend yield.
C) price-earnings ratio.
D) selling price of the stock.
Figure 9-2
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure
9-2 shows the impact of this tariff.
Refer to Figure 9-2. The tariff revenue collected by the government equals the area
A) D + E + F.
B) E.
C) B + D + E + F.
D) C + D + E + F.
Figure 5-13
Figure 5-13 illustrates the market for gasoline before and after the government imposes
a tax to bring about the efficient level of gasoline production.
Refer to Figure 5-13. The amount of the gasoline tax is ________ per gallon.
A) $0.75
B) $1.25
C) $1.75
D) $2.00
Figure 11-14
Figure 11-14 shows the optimal input combinations for the production of a given
quantity of cotton in the United States and in China.
Refer to Figure 11-14. Consider the following statements:
a. For each country, the marginal product per dollar spent on labor equals to the
marginal product per dollar spent on capital.
b. The price of labor is relatively higher in the United States than in China and the price
of capital is relatively lower in the United States than in China.
c. The price of labor and the price of capital are relatively higher in the United States
than in China.
Based on the figure, which of the statements above is true?
A) All of the statements are true.
B) statements a and c only
C) statements a and b only
D) statements b and c only
A game in which each player adopts its dominant strategy
A) will not lead to an equilibrium.
B) must be a cooperative game.
C) could result in a Nash equilibrium.
D) can never result in a Nash equilibrium.
Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save.
Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart
equals 50. The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20.
Marv has only $50 to spend, but has not yet paid for his groceries. How can Marv
increase his total utility without spending more than $50?
A) Marv should substitute his favorite soft drink or the cereal in his cart for generic
brands that have lower prices.
B) Marv should buy more boxes of cereal and fewer bottles of soft drink.
C) Marv should buy fewer boxes of cereal and more bottles of soft drink.
D) Marv should buy fewer boxes of cereal and fewer bottles of soft drink. He can then
spend more on other items.
Figure 11-18
Refer to Figure 11-18. A curve that connects points A, D, and E is called
A) an input-output curve.
B) a total cost line.
C) an expansion path.
D) an indifference line.
When the price of pistachio nuts is $7.50 per lb. the quantity demanded is 48 lbs. When
the price of pistachio nuts is $9.00 per lb. the quantity demanded is 40 lbs. When the
midpoint formula is used to measure the price elasticity of demand we can say that the
demand for pistachio nuts is
A) relatively, but not perfectly, elastic.
B) unit elastic.
C) completely inelastic.
D) relatively, but not perfectly, inelastic.
